Discriminatory practice

Economists admit that the first few years of U. S. experience with the WTO has been reasonably positive. One of those first winning cases involved hormone-fed U. S. beef. Since 1989, the EU has banned the import of U. S. beef produced by using synthetic growth hormones. The U. S. viewed this as a discriminatory practice, outlawed by the WTO, and accused the EU of using it to protect its own beef industry. The U. S. estimated that the ban prevented $250 million worth of beef exports to the EU annually (Taylor, Walsh & Lee 106).

A WTO panel sided with the U. S., saying that the EU exclusion was "inconsistent with the requirements of the WTO's agreement on the Application of Sanitary Phytosanitary Measures (SPS) because it was not based on a risk assessment . . . of the potential adverse impact . . . on human health" (qtd. in Fischer 207). The EU appealed, and the appellate body reversed or modified several of the panel's conclusions. However, the appellate body agreed with the panel's finding that the EU had not scientifically justified its ban. Finally, the EU agreed to allow the import of U. S. hormone-fed beef. Thus, the creation of the SPS Agreement within the WTO framework provided the U.

S. with the perfect vehicle to challenge the European measures (Taylor, Walsh & Lee 101). However, governments seeking to restrict imports on the grounds that their production has been environmentally damaging have been impeded by WTO rules. For example, the US ban on Mexican tuna, which was caught using nets which also trapped and killed dolphins, was overturned by the WTO. The rules state that such bans must be justified by scientific evidence – ethical concerns, such as animal welfare, or consumer concern, as in the case of genetically modified organisms, are not sufficient.

The nature of science and the scientific method mean that it is often difficult, when environmental problems arise, to prove a link between factors causing the problem and the problem itself (Roberts 184). The agreement on Sanitary and Phytosanitary (SPS) Measures was reached at the Uruguay Round as an effort to prevent the misuse of product and process standards, particularly in the area of health. The SPS agreement recognizes countries' right to determine set legitimate standards governing food safety and plant and animal health, but establishes a series of obligations to avoid the use of standards as a barrier to trade.

Specifically, SPS rules allow countries to use measures to protect human, animal, or plant life or health, as long as the measures are not employed in an arbitrary or discriminatory manner. The agreement also requires that countries provide sound scientific evidence for setting food safety standards higher than international norms (Ewers 388). In spite of the WTO provision prohibiting the use of SPS measures, agricultural standards have remained a point of controversy. As of June, 1996, the U. S.

Department of Agriculture had developed a list of 315 technical barriers to U. S. exports to agricultural trade in 63 countries. The USDA unofficially estimated that these 315 measures threatened, constrained, or blocked almost $5 billion of U. S. agricultural exports. Although SPS measures are permitted under international trade rules, but the U. S. Trade Representative and the USDA believe that many SPS measures are disguised barriers to trade (Taylor, Walsh & Lee 103). The protectionist instincts are difficult forces to overcome.

Indeed, it has “become increasingly difficult to delineate the boundaries between a nation’s sovereign right to regulate and its obligation to the international trading system not to restrict trade gratuitously” (Trebilcock & Howse 145). The provisions of the SPS Agreement therefore, are meant to strike a balance between two equally important objectives: helping governments to protect consumers, animals and plant health against known dangers and potential hazards, on one hand, and avoiding the use of health and safety regulations as protectionism in disguise, on the other hand.

In this connection the WTO Agreement on Agriculture stipulate for achieving this balance by means of efficient mechanism of disputes settlement (Taylor, Walsh & Lee 106). The other implication of this agreement for the U. S. agriculture was that it accelerated the globalization of the general economy reinforcing long-term economic and social forces. Labor and capital from a wider geographical range of sources became available to agribusinesses, and in many cases their output could be sold in wider markets (Harrington et al. 58). For instance, the U. S.

Department of Agriculture estimated $5. 17 billion annual benefit to the U. S. from the WTO Agreement on Agriculture upon its full implementation in current year (Green 821). On the other hand, the U. S. agriculture faces further global internationalization and specialization, as long-standing trade barriers are reduced or eliminated. This means there are even fewer people farming, even in successful farming areas, because expansion and enlargement of existing farm operations often means structural change, which displaces more labor than it generates.

In the U. S. farming areas unable to compete in global markets, the changes are more severe, and land transfer to other uses or simply abandonment is not rare (Michelmann et al. 320). Thus, a decline of the number of farms amounted to 1. 48 million farms in 2002, with the projects to the further decline to 1. 29 million in 2007 (Harrington et al. 70). Pressures to consolidate farm operations produce the imbalance between young entrants and older retiring farmers.

Entry barriers, including high capital requirements and lack of credit, may keep out some beginning farmers, but the low rates of farm entry are mostly due to poor earnings prospects in farming compared with other occupations (Fischer 217). Marketing arrangements in the U. S. agriculture are also changing under the influence of world trade liberalization. Traditional livestock, produce, and terminal markets have declined in importance as more of agriculture uses production and marketing contracts (Lyson, Geisler & Schlough 189).

Markets for smaller farms and producers of specialty crops have become in many cases niche markets, wherein the producer attempts to exploit special characteristics of the market. Niche markets are becoming increasingly important for specialty production and small farming. Examples are organic produce, identity-preserved products such as tofu soybeans, roadside marketing, farmers’ markets, pick-your-own commodities, and exotic commodities (Thomson 264). Besides, markets for major grains, oilseeds and fibers became more international with the U. S. ’ entry into the WTO (Harrington et al. 59).